Navigant Research Blog

Smart Buildings Provide New Opportunities for Energy Storage

— July 15, 2015

As the energy storage industry continues to rapidly develop, systems in large commercial buildings are becoming one of the most attractive applications. Energy storage systems in these settings can offer reduced utility bills by continuously monitoring facility usage and taking action when demand is about to cross a specified limit, thus avoiding costly charges.  This business model has been successful in California, where high demand charges combined with incentives through the state’s Self-Generation Incentive Program (SGIP) make for an attractive return on investment.  As battery prices continue to fall, this model is likely to be replicated in other regions.  As explored in Navigant Research’s report, Community, Residential, and Commercial Energy Storage, global deployments of storage in commercial buildings are forecast to increase from 75.2 MW in 2015 to 1,773 MW by 2020, at a compound annual growth rate of 88%.

Emerging Opportunities

There is a natural synergy in energy service companies already providing building automation and energy management/efficiency solutions partnering with storage system providers or offering these solutions themselves.  These companies already have a deep understanding of building operations and energy usage, typically using energy management software, which can be upgraded relatively easily to include an onsite storage system to shave demand peaks.  Similar partnerships already exist between building management and solar energy companies that work together to reduce a facility’s energy costs.  Additionally, the increasing popularity of workplace electric vehicle charging is expected to result in a greater demand for storage systems, as they can help reduce the cost of providing day-time charging to employees and visitors.

New Partnerships and Offerings

The benefit of these types of partnerships has been demonstrated by recent announcements from leading storage and building energy management providers.  Notably, Tesla Motors, which recently announced a line of commercial energy storage systems, has partnered with demand response and energy management software provider EnerNOC.  EnerNOC’s energy intelligence software (EIS) will serve as the connection between batteries and a customer’s facility, enabling more effective demand charge management and demand response programs.  Tesla has also recently announced a partnership with Black & Veatch to provide a similar offering for larger commercial, industrial, and municipal facilities.  Black & Veatch has existing experience in this area, having already designed more than 24 MW of behind-the-meter energy storage capacity for commercial and industrial facilities.

Tesla is far from the only battery manufacturer targeting this emerging space.  Leading lithium ion provider LG Chem recently inked a similar partnership with energy management firm ONEnergy to offer lithium ion-based storage systems to commercial, industrial, and residential customers in northeast North America.  However, one of the most interesting players in this space is likely to be Johnson Controls.  The building and automotive systems giant already manufactures a line of battery products, and it is expected to soon be launching a lithium ion offering primarily targeting its existing building automation and energy management clients.  These existing relationships and the company’s expertise with building systems may give it a significant competitive advantage.  The coming years will likely see more partnerships of this nature as increasing attention is paid to this rapidly growing market.


Data Centers Drive Market for DC Distribution Networks

— July 15, 2015

The market for direct current (DC) distribution networks is not a single, cohesive market. Rather, it encompasses several disparate opportunities—telecommunications towers, data centers, grid-tied commercial buildings, and off-grid military networks—that revolve around different market assumptions, dynamics, and drivers.

Given the expense of current existing redundant alternating current (AC) uninterruptible power supply (UPS) systems, DC data centers would appear to be a no-brainer from an engineering point of view. Despite this, energy remains a small portion of the overall operations budget of data centers. As a result, the value proposition to conservative operations managers may still be a hard sell in the near term. However, DC microgrids can actually offer higher reliability than status quo AC solutions, so validating early adopter DC microgrids is a critical step forward for this market opportunity. The ABB 1 MW DC data center located in Zurich, Switzerland, is just one example of how this application is gaining momentum.

Distributing DC enables replacement of AC-DC converters within individual devices with a smaller number of larger, more efficient converters. LED lighting installations that run on 24V DC lines, for example, require up to 15% less energy than the same lights running on fixture-level rectifiers. Nevertheless, losses in the linings limit 24V DC distributions to just 10 meters, so manufacturers are developing 380V DC wiring to extend comparable benefits to entire data centers and other commercial buildings. Asia Pacific is expected to lead this market in both the near and long-term, with China alone having already deployed hundreds of DC data centers.

DC Data Center Network Implementation Revenue by Region,
Base Scenario, World Markets: 2015-2024

DC Data Network Implementation Revenue

(Source: Navigant Research)

The core challenge facing DC distribution networks lies with the need for standards and open grid architectures that can help integrate the increasing diversity of resources being plugged into retail power grids. Even DC advocates maintain that distribution networks operating at the municipal level may always remain AC systems. The efficiency gains accrued by sticking with DC instead of converting to AC (and then back to DC) are not as great at this higher voltage level. This may remain the sweet spot for AC technology, serving the vital role of interconnecting large wholesale transfers from high-voltage DC (HVDC). In fact, DC microgrids and nanogrids could, ironically enough, extend the life of the incumbent AC distribution system by taking loads off that system in an intelligent and dynamic way.

The focus of the industry, working through the efforts of the EMerge Alliance, is currently medium-voltage DC distribution networks. These systems are mostly concentrated on the data center market segment, but can also apply to commercial buildings—especially those of considerable scale, such as big box retailers (Costco, Walmart, etc.). At present, the majority of progress in developing DC-based technologies has occurred at either the high-voltage (more than 1,000V) or low-voltage (less than 100V) level of electricity service. Since microgrids and building-scale nanogrids typically operate at medium-voltage (roughly 380V to 400V), much work needs to be done to bridge this voltage innovation gap, and this goal is the focus of companies such as ABB, Bosch, Emerson Network Power, and others.

As noted in a previous blog, Bosch is encountering a few regulatory issues when it comes to deploying DC microgrids, primarily an artifact of assumptions that distributed renewables and energy storage are interconnected to the alternating current utility grid. But surprisingly, DC fits in well with AC infrastructure, and is especially accommodating for integrating cutting-edge distributed energy resources.


The Future of U.S. Solar Energy Companies – Part 3

— July 13, 2015

Note:  This blog is the third in a four-part series examining the evolution of U.S. solar companies.

In this blog, part of a series highlighting key trends among U.S. solar PV companies that offer a glimpse of what a post-30% investment tax credit (ITC) world will look like, I will discuss storage and utilities.


Energy storage, primarily in the form of batteries, has been on the horizon for a number of years, but U.S. solar companies are now moving forward with strategic partnerships and storage offerings in certain market segments.

SunEdison will use more than 1,000 flow batteries from Imergy Power Systems for its solar microgrid projects in India. In March, The company announced it was acquiring the project development team, four existing projects, and a reported 100 MW of projects in the pipeline of Solar Grid Storage. Solar Grid Storage is a Pennsylvania-based startup that packages lithium-ion batteries and inverters to provide demand reduction, backup services, peak shaving, and grid stabilization services such as frequency regulation. Similarly, SunPower and Sunverge announced an exclusive agreement to provide solar and storage solutions available in the residential and utility segments in the United States and Australia. SolarCity and Tesla have also announced a strategic energy storage partnership for residential, commercial, and government customers in the United States and in remote communities around the world. It is expected that there will be many more announcements to come.

Due to increasing competition and the expiration of the U.S. federal ITC at the end of 2016, U.S. solar companies will need to continue to evolve their offerings. SunEdison, SolarCity, First Solar, SunPower, and others have all demonstrated a commitment to continuous innovation of their technology and business models, which will result in sustained growth for these and other U.S. solar companies in the future.


One of the most critical issues in the U.S. market today, and after the expiration of the ITC, is how net metering policies will be adjusted within each utility service territory. Here, there is no one-size fits all answer. It will be a fight that will continue to play out differently in each region. Thus far, Arizona has been ground zero for net metering policy fights, with neighboring New Mexico following suit, and California expected to release an update soon. Utilities are increasingly proposing fixed fees on solar PV customers, ranging from $5 to $50 per month, significantly affecting the value proposition to residential solar PV customers. In addition to this, many utilities are also considering providing distributed solar as a service themselves. In some cases, such as APS, they are doing both at the same time.

Solar Electric Power Association put together a great map of where utilities are offering solar PV programs of their own. The map illustrates the variety or business models being employed–ranging from pure utility ownership, to financing, to energy purchases, and other customer programs. Clearly, the concern among U.S. solar PV companies is that monopolies have an unfair advantage due to their status, but utilities also have a point that they enable solar PV to be utilized in such great volume because of the stabilizing and backup role they will play now and increasingly in the future. That is why more than a dozen value-of-solar analyses are being conducted across the country and U.S. solar companies will need to continue to adapt.

For more information on the most recent regulatory updates affecting distributed solar PV, check out North Carolina State University’s recent report on the topic.


Do Energy Efficiency Investments Deliver? Yes!

— July 13, 2015

A new paper from the University of California, Berkeley and the University of Chicago garnered a little press this week and deserves a deeper dive. The paper makes a broad claim about demand-side management (DSM) program impacts based on a comprehensive study of program performance, with one hitch—the focus is exclusively low-income weatherization. One Forbes perspective came to the conclusion that “the study shatters a central orthodoxy in the rarified realm of energy and environmental policy. It suggests that energy efficiency is not necessarily a win-win solution for the environment and the economy. That suggestion is likely to influence future political debates over federal subsidies for energy efficiency.”

The authors have made a dramatic claim that falls short of the bigger picture on DSM program impacts. The paper states that “even when accounting for the broader societal benefits of energy efficiency investments, the costs still substantially outweigh the benefits; the average rate of return is approximately -9.5% annually.” Low-income programs have long had a special place in utility DSM projects as a public benefit and have been accepted as a part of the broader portfolio approach to energy efficiency by passing less stringent cost-effectiveness tests than other program types.

In fact, in an American Council for an Energy-Efficiency Economy (ACEEE) paper from 2014, this very issue was fleshed out. Low-income programs have faced distinct challenges from other energy efficiency programs but do not represent the overall cost and benefits of DSM as a whole. Let’s take a deeper look at recent utility program performance. 

Here are the results from the most recent Energy Efficiency Evaluation Report for the state of California:

California Energy Savings for Statewide 2010-2012 Portfolio

Casey Chart

 (Source: California Public Utility Commission)

The report also states that the portfolio of energy efficiency activities for 2010-2012 was cost-effective, with every dollar invested in non-codes and standards energy efficiency returning $1.04.

Extrapolating the performance of one category of a utility energy efficiency program, in one state, from one study can mislead the public in understanding the macro-level impacts of energy efficiency as a whole. Maybe even more problematic is the threat of using this kind of academic assessment as fodder for the heating politics of energy policy in the United States. Let’s keep an honest focus on the big picture.


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